devoish (95.83)

Poverty

14

Think for a moment what that means. In the USA in 2007 the Gov says you are living in poverty if your income is $10,400 annually for a single person. That is an income of $200.00 per week. Imagine your lifestyle on $200.00 per week. You get a nice studio apartment in a crack house for $500 per month. Paint peeling off the walls, drafty, tape on the cracked window. Leaves you with $85 per week for paint, heat, electric, clothes, food, transportation (WTF, you aren’t going anywhere). It all seems pretty grim.

You however, are determined to not let that lifestyle happen to you. And you are willing to work to make sure it does not. First thing you do is getter a better apartment. You cannot take the chance of being out of work because you got sick living in a rat infested crack den, or missing days of work because your wheel was stolen off your car or getting robbed because you dress nice for work and look like you have money. You spend $850 per month to get a place upstairs in an older couples house, but it’s a good deal because it includes utilities. You are further from work now and decide to spend $79 per month on a reliable Focus lease for transportation, until you learn that Geico will insure your 19 year old recklessness for only $1100/month. So instead you get a loan for a used 2003 Focus and have car payments of $175 per month and insurance of $208. You get a cell phone for $29.95 per month so you can be called for overtime at a moments notice. You skip the health insurance because you job doesn’t offer it and $400 per month is nuts, and you are young so you just take your chances. You are frugal so like the poverty person above you budget $216 ($50.00/week) per month for gas, food, clothes, etc. Your total expenses are $1479 per month and you budget an additional $250 per month for retirement which you stick in a Roth IRA, because the TMF calculator tells you that if you save $250 per month at 8% you will have one million dollars to retire on age 60. You skip the expense of TMF newsletters, and invest yourself in SPY because you do not want to waste money on a PC and internet connection. Each month you check that your employer has deposited the money into your Fidelity account.

There you were, eighteen, young and strong, right out of HS in 2005 earning $24,000 a year and on your way to being a millionaire. Somehow you figured out this plan in spite of “not being college material” as they said. And you kept at it even though things did not always go as smoothly as you budgeted. Remember that first year when you missed six retirement deposits because that used Focus transmission blew up, and how you made it up later with money from your raises? And then when your boss laid you off and you had to start over at a beginner’s salary with a new company. That was a tough day, but at only twenty one years old you still had time It had been a surprise to learn that inflation of 4% added $830 to your expenses that first year, and your first $1040/year raise only paid back one month of the six missed retirement deposits. Over time you got more raises and better jobs, but inflation kept eating away at you. Twenty six years later you were earning $65000 but you were still behind on getting to that million. Somehow your expected expenses had risen 4% annually to $55,000 but you still had surprise bills and were still trying to make up for earlier misses and eight% interest you could never recoup. Finally at age sixty in the year 2065, you reached your million and you could finally retire after living frugally, barely above poverty, for forty two years. You had never had kids, never wasted money on an engagement ring or dating, never taken a vacation or driven a sports car. You had never bought life insurance or healthcare. You had cooked your own meals, and walked to the beach. You had been lucky, you never got injured, never got sick and never missed work through any fault of your own and now you were done. You decided that you would live until you were eighty and enjoy twenty years of retirement. You divided your one million retirement fund into twenty equal $50,000 piles.

Four percent inflation had raised the poverty level to $54,000.

It all seems pretty grim.

According the US Census in 2005 the National College graduation rate is 25.9%. “With commencement ceremonies approaching, college seniors in this country should feel confident of their economic future” Census Bureau Director Louis Kincannon said. “College graduates may expect to earn, on average, nearly $2.1million dollars in their lifetimes. That is nearly twice as much as those have only high school diplomas.” C.M. Russell, over at Secrets of the Job Hunt, was kind enough to share some starting salaries, by major, of college graduates from the 2006 graduating classes. His information is from membership-based naceweb.org:

No thanks to the Federal, state and local governments. They over tax, they over spend they create debt, you borrow money, the money inflates, the economy stagnates and you wind up wasting away. The education system stinks, because it is a lobbyist bureaucracy, the congress won't let you keep your money, and won't let business expand, your government squanders your money and robs you, and eventually you lose everything, when the dollar collapses and it is worth nothing. Remember the expression not worth a continental? Well just vote for marxist and neocons, and the entire country will die. Come visit my blog, and read the Fall of democracy.

From bondage to spiritual faith, from spiritual faith to great courage, from great courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependancy, from dependancy back to bondage.

Note to Dwot: I used the word "inflation" in the way it is used most normally today to describe price increases. My thanks to the teacher for helping me understand inflation is additional money suppy and price increases are the result of inflation, but they are not inflation.

True, technically you say that inflationary monetary policy caused the price increases. either way, it stinks, but just because A than B does not mean B was caused by A. Price increases happen in tight supply v demand markets, not just monetary inflation, so just because we have higher prices does not mean A caused it, but I would say it is hurting all the same, and it is helping to cause it.

But that's how it's been for most of the course of human history. As a whole, in this country, we have more discretionary spending money than people have ever had and we work fewer hours. I have no assurnaces this can continue indefinitely.

Looking up in my old check register... In 2004 when I got my job out of college, after making the mortgage payments I had a monthly income of $746.08, but only $471.47 after charitable contributions.

No bull, less than $475 per month to pay the bills. It was nearly impossible, but I pulled it off somehow. Fortunately, that didn't last too long and I'm fairly well off now.

While I've got empathy for anyone in a tough situation, I don't have much time to listen to people complain they can't pay their cable bill and new car note on three times the money I was making.

This is a very negative outlook on life in general and earnings potenial in particular. I come from a family where we all have at least one college degree (8 degrees between the 4 of us) and I married into a bigger family with only two college degrees between all of them - both are my wife's. One brother-in-law is an IT specialist (self-taught) and makes a decent living - much more than the poverty level. The second brother-in-law has his Section 8 cert and works for BofA at a nice salary (yes, no degree). The third brother-in-law works his tail off at a deli he started, but again makes a good living. My father-in-law came to the US when he was 14 with little to his name and started making a living by driving cabs. He saved his pennies and now drives his own dump truck (self employed). He made $92k last year, and has a 4 bedroom house that has been long since paid off.

Life isn't about whether or not you have a degree, but what you do with the options presented to you.

Great post. Bleak, yet not so bleak that you want to sit in your closed garage while the engine runs.

I agree with Imperial that people tend to think certain luxuries are necessities. Simplification is the key to saving. We are spoiled into thinking that we must have cable, a nice car, an expensive cell phone and call plan - we don't need any of those things.

People stuck in poverty while pi$$ing money away on stupid crap because they want to "live the dream" make me want to puke.

They "work" a measly 20 hours a week in retail, are lazy walk around and never do the job right - believe me I've seen it first hand. Poor people are poor because they choose to be so.

Achieving "middle class" isn't hard, you can make that at any managerial position at your local grocery store.

Poor people make just enough to get their benefits. My father is a manager at a grocery chain (somewhere in the ghetto, i.e. drive across town into the crap)... he asked his superior once: "How come we never have any backup cashiers", his boss replied: "They can only work so many hours per week, or else they'll loose their benefits!" They government pays you to be poor and lazy... doesn't seem so bad to me.

They pay foor your food, health care, sometimes your rent... what else do you need? The real strugglers are the middle class, 30-60 thousand a year. Make too much to get a break, can't make enough to do better than barely scrape by.

Besides, someone making $10,400/YR. would get food stamps (atleast $300/Mo.) and medicade... and if your a single woman, poppin' out babies is the cash crop.

I heard about one woman who had some sort of disease (Muscular Dystrophy or something), and every child she had came out sick and died within a few years. The woman (who was living in poverty) just kept on poppin' out the babies, so she could get the government checks... that was probably the most discusting thing I ever heard in my life.

One way or another, life is tough for everyone. :)If you're "willing to work", you'll always go far- either at a degree, or just at a job.

I am not suggesting a person needs to get a degree. In fact it is possible that the person I described is better off than the lower earning degrees, who are saddled with college debt and four less earning years. I should not have put at the end (74% get poverty) as though it is only the non college educated that are destined for poverty. Some of the non college folks will get union jobs or succeed in a business or sales and stay out of poverty. Many of the college educated will fall ill or work for CFC or Enron and become poor.

I am happy your family is doing well, but it seems some familys are not doing as well, and I have to wonder if your deli owner brother in law has health insurance. The fellow in my example just never got sick.

By the way, your posts are excellent, thanks.

Eldemonio,

People stuck in poverty are not pissing money away on stupid crap they cannot afford. Those are people heading toward poverty.

People without money do not have those things. Of course people trying to better themselves need to "dress to impress" and "look the part". You cannot miss a sale for lack of a phone,or an appointment for lack of a reliable car. Sometimes it is hard to tell the difference.

Eskatonic,

Some people in the US worry about having a TV or car. Others freeze to death in the winter or die from the heat in the summer. Many die for lack of a doctor. As long as you can pick through garbage you will not starve here, but many are hungry. The fact that it could be worse does not make it ok. Will Smith did that uplifting story about the guy with the kid who succeeded at trading. On the way to success they missed meals and slept in the toilet. They accepted charity from nuns. He solved the rubics cube the first time he picked one up. He was smarter than the smart guys in the class and worked a little harder. Everybody else in the class would not have been smart enough. Had he been born with slightly less intelligence or not outrun the cabby he and his would be poverty bound too. No movie though.